DECISION FOUND THAT ONE CLASS I RAILROAD (UNION PACIFIC RAILROAD COMPANY) ACHIEVED REVENUE ADEQUACY FOR THE YEAR 2010, IN ACCORDANCE WITH THE BOARD'S STANDARDS AND PROCEDURES DEVELOPED TO MAKE THAT DETERMINATION.

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Full Text of Decision

XX

41874SERVICE
DATE – NOVEMBER 3, 2011

EB

This
decision will be included in the bound volumes of the STB

printed
reports at a later date.

SURFACE
TRANSPORTATION BOARD

Docket
No. EP 552 (Sub-No. 15)

RAILROAD
REVENUE ADEQUACY—2010 DETERMINATION

Digest:[1]The agency finds that one Class I railroad
(Union Pacific Railroad Company) is revenue adequate for the year 2010, meaning
that one of the Class I railroads achieved a rate of return equal to or greater
than the Board’s calculation of the average cost of capital to the freight rail
industry.

Decided:November 2, 2011

BY THE BOARD:

This annual
determination of railroad revenue adequacy under 49 U.S.C. § 10704(a)(3) is made in accordance with the standards and procedures
developed in Standards for Railroad Revenue Adequacy, 364 I.C.C.
803 (1981), Standards for Railroad Revenue Adequacy, 3 I.C.C. 2d
261 (1986), and Supplemental Reporting of Consolidated Information for
Revenue Adequacy, 5 I.C.C. 2d 65 (1988).Pursuant to those procedures, which are
essentially mechanical, a railroad is considered revenue adequate under
49 U.S.C. § 10704(a) if it achieves a rate of return on net investment
(ROI) equal to at least the current cost of capital for the railroad industry.

In Railroad
Cost of Capital—2010, EP 558 (Sub-No. 14) (STB served Oct. 3,
2011), we determined that the 2010 railroad industry cost of capital was
11.03%.By comparing this figure to the
2010 ROI data obtained from the carriers’ Annual Report R-1 Schedule 250
filings, we have calculated a revenue adequacy figure for each of the Class I
freight railroads that were in operation as of December 31, 2010.

A summary
of the ROIs for all Class I railroads is set forth in Appendix A to this
decision.Appendix B provides the
railroads’ R-1 Schedule 250 data that was used to compute the ROIs.We find one carrier (Union Pacific Railroad
Company) to be revenue adequate for 2010.Our findings with respect to the Class I carriers will be final on the
effective date of this decision.

This action
will not significantly affect either the quality of the human environment or
the conservation of energy resources.

Add:Gain or (loss) from
transfer/reclassification to nonrail-status (net of
income taxes)

51,185

(2,217)

799

1,090

26,767

429

14,112

**
Adjusted Net Railway Operating Income **

2,675,869

1,744,079

604,975

199,360

1,667,975

213,091

3,045,582

** Calculating the Adjusted
Investment in Railroad Property for The Reporting Entity**

Combined
Investment in Railroad Property Used in Transportation Service – Ending
Balance

46,300,386

22,927,514

9,433,123

2,572,767

22,141,872

3,703,035

36,912,303

Combined
Investment in Railroad Property Used in Transportation Service – Beginning
Balance

32,703,496

22,480,486

9,194,395

2,454,152

21,619,944

3,641,226

35,995,999

Combined
Investment in Railroad Property Used in Transportation Service – Average

39,501,941

22,704,000

9,313,759

2,513,460

21,880,908

3,672,131

36,454,151

Other
Elements of Investment – Ending Balance

0

0

1,863

0

0

1,135

0

Other
Elements of Investment – Beginning Balance

0

0

1,863

0

0

1,135

0

Other
Elements of Investment – Average

0

0

1,863

0

0

1,135

0

Interest
During Construction – Ending Balance

0

0

2,113

4,320

2,580

21,504

43,309

Interest
During Construction – Beginning Balance

0

0

2,113

4,187

2,580

19,085

43,373

Interest
During Construction – Average

0

0

2,113

4,254

2,580

20,295

43,341

Net
Rail Assets of Rail Related Affiliates – Ending Balance

318,021

0

200,443

0

0

0

0

Net
Rail Assets of Rail Related Affiliates – Beginning Balance

304,353

0

41,957

0

0

0

0

Net
Rail Assets of Rail Related Affiliates – Average

311,187

0

121,200

0

0

0

0

Working
Capital Allowance – Ending Balance

662,693

218,469

51,939

65,931

649,032

86,135

900,106

Working
Capital Allowance – Beginning Balance

652,172

215,072

41,582

68,370

592,919

64,312

735,086

Working
Capital Allowance – Average

657,433

216,771

46,761

67,151

620,976

75,224

817,596

Accumulated
Deferred Income Tax Credits – Ending Balance

14,019,998

7,010,537

2,985,545

558,326

7,489,154

1,105,164

11,092,135

Accumulated
Deferred Income Tax Credits – Beginning Balance

8,885,297

6,689,339

2,825,863

513,261

7,071,020

1,025,981

10,577,315

Accumulated
Deferred Income Tax Credits – Average

11,452,648

6,849,938

2,905,704

535,794

7,280,087

1,065,573

10,834,725

Tax
Adjusted Net Investment Base – Ending Balance

33,261,102

16,135,446

6,695,984

2,076,052

15,299,170

2,661,367

26,676,965

Tax
Adjusted Net Investment Base – Beginning Balance

24,774,724

16,006,219

6,448,095

2,005,074

15,139,263

2,659,337

26,110,397

*
Tax Adjusted Net Investment Base *

29,017,913

16,070,833

6,572,040

2,040,563

15,219,217

2,660,352

26,393,681

TAX
ADJUSTED RETURN ON INVESTMENT

9.22%

10.85%

9.21%

9.77%

10.96%

8.01%

11.54%

The line item descriptions in this schedule are
defined in the instructions to the Schedule 250 appearing in Supplemental
Reporting of Consolidated Information for Revenue Adequacy Purposes, 5
I.C.C. 2d 65, 80-82 (1988).The
Schedule 250 form and instructions are not published in the Code of Federal
Regulations.

[1]The digest constitutes no part of the decision of the Board
but has been prepared for the convenience of the reader.It may not be cited to or relied upon as
precedent.Policy Statement on Plain
Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010).